HSBCs Haircut

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What's going on?

HSBCs iconic towers will soon be emptier: according to reports on Monday, Europes biggest bank will shortly trim 10,000 jobs.

What does this mean?

HSs-Big-Costs have weighed on the bank for a while, particularly in Europe: a quarter of its employees are there, despite HSBC making a loss in Europe in each of the past two years. After its former CEO was fired in August for not firing people, HSBCs new boss has immediately got to work and plans to slash almost 5% of HSBCs 238,000 jobs.


HSBCs shears arent quite as big as it sounds, however: some 4,000 of the cuts will come from selling off its French retail bank (think: savings and loans). And HSBC plans to keep hiring in Asia, where it makes nearly 90% of its profits. Though with most of that hailing from Hong Kong, its earnings might shrink the regions struggling economy has recently forced HSBC to lower fees.

Why should I care?

The bigger picture: Its tough to be a banker.


Falling interest rates around the world have made it tough for global banks to turn a profit: low rates shrink the difference between what banks pay depositors and creditors, and what they make from loans. HSBC isnt alone. In August, Deutsche Bank announced itd fire 18,000 people and over the weekend, American investment manager Invesco said it had cut 12% of its newly enlarged workforce, after buying rival OppenheimerFunds earlier this year.



For markets: Mind the gap between US and European banks.


Since the global financial crisis, US banks have grown their profits at a faster pace than their European rivals. Investors will see if that still holds true next week, when US banks reveal their third-quarter earnings and European banks follow in a few weeks time (tweet this). Expectations of American banks are low: earnings projections for both 2019 and 2020 have declined this year. Those forecasts could fall further: the US central bank might yet lower interest rates further this month.

Originally posted as part of the Finimize daily email.

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